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IR35: Why Role Based Assessments Are Not Enough

In terms of controlling your risks and treating contractors fairly, not to mention sourcing key skills at a sensible price, blanket or “role-based” assessments are not the answer. There is a place for them in your broader strategy, but they can’t take the place of individualIR35 assessment

How recruiters can use role-based IR35 assessments

When you're marketing a contracting role, applicants will want to know how much they’re likely to take home, and IR35 status has a profound effect on take-home pay. At this stage, individual assessment for each applicant would take too long and cause delays. A role-based assessment will allow you to set applicants’ expectations so they can make an informed decision about whether to accept the contract.

However, you’ll still need to complete an individual assessment for each successful applicant, to make sure they’re working under the correct status.

Why individual IR35 assessments are important

A role-based assessment can’t take into account the contractor’s individual circumstances or working practices. For example, the contractor might have several assignments running for different clients at the same time, have a documented history of correcting mistakes at their own cost, and a well-established sales and marketing process for sourcing new work. All of these factors could affect their IR35 status, but would not show up in a role-based assessment.  

Relying on role-based assessments is likely to result in a significant number of contractors working under the wrong status. Whichever way the error occurs, this is bad for you and your clients.

Incorrect “outside” decisions

If the contractor is incorrectly found to be outside IR35, you as the fee payer could be liable for any additional tax and NICs, including employers NICs, that are not paid as a result. Aside from the additional costs, the resulting HMRC investigation could alienate your client, who looks to you for advice as their trusted recruitment expert, and damage your hard-won reputation.

Incorrect “inside” decisions

Deciding that the contractor should work inside IR35 appears, on the surface at least, to be less risky. However, an inside decision increases the cost of engaging contractors, while at the same time reducing their take home pay. The resulting combination of spiralling costs and shortages of key skills have already persuaded many engagers to re-think this strategy.

What’s the best way to manage IR35?

If you need to set contractor expectations in advance, it's worth completing an assessment based on the role alone. However, the only way to control your risks and source the skills your clients need without allowing costs to increase unnecessarily is to also complete an individual assessment for each contractor.

Compliance experts like Orange Genie Compliance will help you design and implement robust processes that will allow you and your clients to meet these obligations without holding up your supply chain or creating delays.

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